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Q:
If the price of a euro (the European currency) increases from $1.00 to $1.10, then, everything else held constant
A. a European vacation becomes less expensive.
B. a European vacation becomes more expensive.
C. the cost of a European vacation is not affected.
D. foreign travel becomes impossible.
Q:
American farmers who sell beef to Europe benefit most from
A. a decrease in the dollar price of euros.
B. an increase in the dollar price of euros.
C. a constant dollar price for euros.
D. a European ban on imports of American beef.
Q:
Everything else held constant, a decrease in the value of the dollar relative to all foreign currencies means that the price of foreign goods purchased by Americans
A. increases
B. decreases.
C. remains unchanged.
D. either increases, decreases, or remains unchanged.
Q:
When in 1985 a British pound cost approximately $1.30, a Shetland sweater that cost 100 British pounds would have cost $130. With a weaker dollar, the same Shetland sweater would have cost
A. less than $130.
B. more than $130.
C. $130, since the exchange rate does not affect the prices that American consumers pay for foreign goods.
D. $130, since the demand for Shetland sweaters will decrease to prevent an increase in price due to the stronger dollar.
Q:
From 1980 to 1985 the dollar appreciated relative to the British pound. Holding everything else constant, one would expect that, when compared to 1980
A. fewer Britons traveled to the United States in 1985.
B. Britons imported more wine from California in 1985.
C. Americans exported more wheat to England in 1985.
D. more Britons traveled to the United States in 1985.
Q:
From 1980 to early 1985 the dollar ________ in value, thereby benefiting American ________.
A. appreciated; consumers
B. appreciated, businesses
C. depreciated; consumers
D. depreciated, businesses
Q:
Everything else held constant, a stronger dollar benefits ________ and hurts ________.
A. American businesses; American consumers
B. American businesses; foreign businesses
C. American consumers; American businesses
D. foreign businesses; American consumers
Q:
Everything else held constant, a weaker dollar will likely hurt
A. textile exporters in South Carolina.
B. wheat farmers in Montana that sell domestically.
C. automobile manufacturers in Michigan that use domestically produced inputs.
D. furniture importers in California.
Q:
Which of the following is most likely to result from a stronger dollar?
A. U.S. goods exported aboard will cost less in foreign countries, and so foreigners will buy more of them.
B. U.S. goods exported aboard will cost more in foreign countries and so foreigners will buy more of them.
C. U.S. goods exported abroad will cost more in foreign countries, and so foreigners will buy fewer of them.
D. Americans will purchase fewer foreign goods.
Q:
Everything else constant, a stronger dollar will mean that
A. vacationing in England becomes more expensive.
B. vacationing in England becomes less expensive.
C. French cheese becomes more expensive.
D. Japanese cars become more expensive.
Q:
The market where one currency is converted into another currency is called the ________ market.
A. stock
B. bond
C. derivatives
D. foreign exchange
Q:
The price of one country's currency in terms of another country's currency is called the
A. exchange rate.
B. interest rate.
C. Dow Jones industrial average.
D. prime rate.
Q:
American companies can borrow funds
A. only in U.S. financial markets.
B. only in foreign financial markets.
C. in both U.S. and foreign financial markets.
D. only from the U.S. government.
Q:
Budget deficits are important because deficits
A. cause bank failures.
B. always cause interest rates to fall.
C. can result in higher rates of monetary growth.
D. always cause prices to fall.
Q:
Budgets deficits can be a concern because they might
A. ultimately lead to higher inflation.
B. lead to lower interest rates.
C. lead to a slower rate of money growth.
D. lead to higher bond prices.
Q:
What happens to economic growth and unemployment during a business cycle recession? What is the relationship between the money growth rate and a business cycle recession?
Q:
When a budget deficit occurs in the United States, the U.S. Treasury finances this deficit by
A. borrowing.
B. imposing a moratorium of new government spending.
C. increasing the tax rate.
D. printing more dollars.
Q:
A budget ________ occurs when government expenditures exceed tax revenues for a particular time period.
A. deficit
B. surplus
C. surge
D. surfeit
Q:
When tax revenues are greater than government expenditures, the government has a budget
A. crisis.
B. deficit.
C. surplus.
D. revision.
Q:
________ policy involves decisions about government spending and taxation.
A. Monetary
B. Fiscal
C. Financial
D. Systemic
Q:
The organization responsible for the conduct of monetary policy in the United States is the
A. Comptroller of the Currency.
B. U.S. Treasury.
C. Federal Reserve System.
D. Bureau of Monetary Affairs.
Q:
The management of money and interest rates is called ________ policy and is conducted by a nation's ________ bank.
A. monetary; superior
B. fiscal; superior
C. fiscal; central
D. monetary; central
Q:
Between 1950 and 1980 in the U.S., interest rates trended upward. During this same time period
A. the rate of money growth declined.
B. the rate of money growth increased.
C. the government budget deficit (expressed as a percentage of GNP) trended downward.
D. the aggregate price level declined quite dramatically.
Q:
Countries that experience very high rates of inflation may also have
A. balanced budgets.
B. rapidly growing money supplies.
C. falling money supplies.
D. constant money supplies.
Q:
Evidence from the United States and other foreign countries indicates that
A. there is a strong positive association between inflation and growth rate of money over long periods of time.
B. there is little support for the assertion that "inflation is always and everywhere a monetary phenomenon."
C. countries with low monetary growth rates tend to experience higher rates of inflation, all else being constant.
D. money growth is clearly unrelated to inflation.
Q:
There is a ________ association between inflation and the growth rate of money ________.
A. positive; demand
B. positive; supply
C. negative; demand
D. negative; supply
Q:
Complete Milton Friedman's famous statement, "Inflation is always and everywhere a ________ phenomenon."
A. recessionary
B. discretionary
C. repressionary
D. monetary
Q:
From 1950-2014 the price level in the United States increased more than
A. twofold.
B. threefold.
C. sixfold.
D. tenfold.
Q:
If the prices would have been much higher ten years ago for the items the average consumer purchased last month, then one can likely conclude that
A. the aggregate price level has declined during this ten-year period.
B. the average inflation rate for this ten-year period has been positive.
C. the average rate of money growth for this ten-year period has been positive.
D. the aggregate price level has risen during this ten-year period.
Q:
Which of the following is a TRUE statement?
A. Money or the money supply is defined as Federal Reserve notes.
B. The average price of goods and services in an economy is called the aggregate price level.
C. The inflation rate is measured as the rate of change in the federal government budget deficit.
D. The aggregate price level is measured as the rate of change in the inflation rate.
Q:
It is true that inflation is a
A. continuous increase in the money supply.
B. continuous fall in prices.
C. decline in interest rates.
D. continually rising price level.
Q:
A continuing increase in the growth of the money supply is likely followed by
A. a recession.
B. a depression.
C. an increase in the price level.
D. no change in the economy.
Q:
________ theory relates the quantity of money and monetary policy to changes in aggregate economic activity and inflation.
A. Monetary
B. Fiscal
C. Financial
D. Systemic
Q:
Evidence from business cycle fluctuations in the United States indicates that
A. a negative relationship between money growth and general economic activity exists.
B. recessions are usually preceded by declines in bond prices.
C. recessions are usually preceded by dollar depreciation.
D. recessions are usually preceded by a decline in the growth rate of money.
Q:
Prior to almost all recessions since 1950, there has been a drop in
A. inflation.
B. the money stock.
C. the growth rate of the money stock.
D. interest rates.
Q:
During a recession, output declines result in
A. lower unemployment in the economy.
B. higher unemployment in the economy.
C. no impact on the unemployment in the economy.
D. higher wages for the workers.
Q:
Sustained downward movements in the business cycle are referred to as
A. inflation.
B. recessions.
C. economic recoveries.
D. expansions.
Q:
The upward and downward movement of aggregate output produced in the economy is referred to as the
A. roller coaster.
B. see saw.
C. business cycle.
D. shock wave.
Q:
Money is defined as
A. bills of exchange.
B. anything that is generally accepted in payment for goods and services or in the repayment of debt.
C. a risk-free repository of spending power.
D. the unrecognized liability of governments.
Q:
What crucial role do financial intermediaries perform in an economy?
Q:
The delivery of financial services electronically is called
A. e-business.
B. e-commerce.
C. e-finance.
D. e-possible.
Q:
Which of the following is NOT a financial institution?
A. a life insurance company
B. a pension fund
C. a credit union
D. a business college
Q:
The financial intermediaries that the average person interacts with most frequently are
A. exchanges.
B. over-the-counter markets.
C. finance companies.
D. banks.
Q:
Financial institutions that accept deposits and make loans are called
A. exchanges.
B. banks.
C. over-the-counter markets.
D. finance companies.
Q:
Banks and other financial institutions engage in financial intermediation, which
A. can hurt the performance of the economy.
B. can benefit economic performance.
C. has no effect on economic performance.
D. involves borrowing from investors and lending to savers.
Q:
Financial institutions search for ________ has resulted in many financial innovations.
A. higher profits
B. regulations
C. respect
D. higher risk
Q:
Banks, savings and loan associations, mutual savings banks, and credit unions
A. are no longer important players in financial intermediation.
B. since deregulation now provide services only to small depositors.
C. have been adept at innovating in response to changes in the regulatory environment.
D. produce nothing of value and are therefore a drain on society's resources.
Q:
Banks
A. provide a channel for linking those who want to save with those who want to invest.
B. produce nothing of value and are therefore a drain on society's resources.
C. are the only financial institutions allowed to give loans.
D. hold very little of the average American's wealth.
Q:
Banks are important to the study of money and the economy because they
A. channel funds from investors to savers.
B. have been a source of rapid financial innovation.
C. are the only important financial institution in the U.S. economy.
D. create inflation.
Q:
A financial crisis is
A. not possible in the modern financial environment.
B. a major disruption in the financial markets.
C. a feature of developing economies only.
D. typically followed by an economic boom.
Q:
Channeling funds from individuals with surplus funds to those desiring funds when the saver does not purchase the borrower's security is known as
A. barter.
B. redistribution.
C. financial intermediation.
D. taxation.
Q:
Why is it important to understand the bond market?
Q:
What is a stock? How do stocks affect the economy?
Q:
When I purchase a corporate ________, I am lending the corporation funds for a specific time. When I purchase a corporation's ________, I become an owner in the corporation.
A. bond; stock
B. stock; bond
C. stock; debt security
D. bond; debt security
Q:
The Dow reached a peak of over 11,000 before the collapse of the ________ bubble in 2000.
A. housing
B. manufacturing
C. high-tech
D. banking
Q:
The decline in stock prices from 2000 through 2002
A. increased individuals' willingness to spend.
B. had no effect on individual spending.
C. reduced individuals' willingness to spend.
D. increased individual wealth.
Q:
On ________, October 19, 1987, the stock market experienced its worst one-day drop in its entire history with the DJIA falling by 22%.
A. "Terrible Tuesday"
B. "Woeful Wednesday"
C. "Freaky Friday"
D. "Black Monday"
Q:
A share of common stock is a claim on a corporation's
A. debt.
B. liabilities.
C. expenses.
D. earnings and assets.
Q:
Fear of a major recession causes stock prices to fall, everything else held constant, which in turn causes consumer spending to
A. increase.
B. remain unchanged.
C. decrease.
D. cannot be determined.
Q:
Low stock market prices might ________ consumers willingness to spend and might ________ businesses willingness to undertake investment projects.
A. increase; increase
B. increase; decrease
C. decrease; decrease
D. decrease; increase
Q:
An increase in stock prices ________ the size of people's wealth and may ________ their willingness to spend, everything else held constant.
A. increases; increase
B. increases; decrease
C. decreases; increase
D. decreases; decrease
Q:
Changes in stock prices
A. do not affect people's wealth and their willingness to spend.
B. affect firms' decisions to sell stock to finance investment spending.
C. occur in regular patterns.
D. are unimportant to decision makers.
Q:
When stock prices fall
A. an individual's wealth is not affected nor is their willingness to spend.
B. a business firm will be more likely to sell stock to finance investment spending.
C. an individual's wealth may decrease but their willingness to spend is not affected.
D. an individual's wealth may decrease and their willingness to spend may decrease.
Q:
A rising stock market index due to higher share prices
A. increases people's wealth, but is unlikely to increase their willingness to spend.
B. increases people's wealth and as a result may increase their willingness to spend.
C. decreases the amount of funds that business firms can raise by selling newly-issued stock.
D. decreases people's wealth, but is unlikely to increase their willingness to spend.
Q:
Stock prices are
A. relatively stable trending upward at a steady pace.
B. relatively stable trending downward at a moderate rate.
C. extremely volatile.
D. unstable trending downward at a moderate rate.
Q:
The stock market is
A. where interest rates are determined.
B. the most widely followed financial market in the United States.
C. where foreign exchange rates are determined.
D. the market where most borrowers get their funds.
Q:
High interest rates might cause a corporation to ________ building a new plant that would provide more jobs.
A. complete
B. consider
C. postpone
D. contemplate
Q:
Everything else held constant, an increase in interest rates on student loans
A. increases the cost of a college education.
B. reduces the cost of a college education.
C. has no effect on educational costs.
D. increases costs for students with no loans.
Q:
An increase in interest rates might ________ saving because more can be earned in interest income.
A. encourage
B. discourage
C. disallow
D. invalidate
Q:
High interest rates might ________ purchasing a house or car but at the same time high interest rates might ________ saving.
A. discourage; encourage
B. discourage; discourage
C. encourage; encourage
D. encourage; discourage
Q:
A reduction in the money supply will result in:
A) a lower interest rate and more negative output gap
B) a higher interest rate and more positive output gap
C) a lower interest rate and more positive output gap
D) a higher interest rates and more negative output gap
Q:
An increase in the money supply will cause
A) the IS curve to shift down and to the right.
B) the IS curve to shift up and to the left.
C) the LM curve to shift down and to the right.
D) the LM curve to shift up and to the left.
Q:
At any point along the LM curve,
A) the quantity of money demanded equals the quantity of money supplied.
B) the economy must be in general equilibrium.
C) the nominal interest rate must equal the real interest rate.
D) saving must equal investment.
Q:
The LM curve slopes upward to the right because
A) the demand for money plus the demand for nonmoney assets must equal the supply of money plus the supply of nonmoney assets.
B) a higher real interest rate is associated with a higher level of the output gap in money market equilibrium.
C) a higher real interest rate is associated with a higher level of saving in goods market equilibrium.
D) in equilibrium the actual real interest rate must increase one-for-one with expected real interest rate.
Q:
The LM curve is the combinations of
A) the output gap and the real interest rate for which the money market is in equilibrium.
B) the inflation rate and nominal interest rate for which the money market is in equilibrium.
C) the inflation rate and real interest rate for which the money market is in equilibrium.
D) the inflation rate and real interest rate for which the goods market is in equilibrium.
Q:
An increase in the output gap causes the demand for real balances
A) to rise and the interest rate to fall.
B) to fall and the interest rate to rise.
C) and the interest rate to fall.
D) and the interest rate to rise.
Q:
A decline in the output gap causes the demand for real balances
A) to rise and the interest rate to fall.
B) to fall and the interest rate to rise.
C) and the interest rate to fall.
D) and the interest rate to rise.
Q:
How does an expansionary monetary policy affect aggregate expenditures according to the bank lending channel?
Q:
The ways in which monetary policy affect output and prices are known as:
A) channels
B) stations
C) vehicles
D) means
Q:
Which of the following is NOT generally recognized as a channel for monetary policy?
A) interest rate channel
B) balance sheet channel
C) financial market channel
D) bank lending channel